DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $202.17 +$0.26*

Hogs: Higher Futures: Mixed Lean Equiv: $87.80 +$0.42**

*Based on formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue.

GENERAL COMMENTS:

Cash cattle traded lower for the week with cattle in the South traded $1.00 lower while Northern cattle traded $3.00 lower. This was factored in by the end of the week with traders positioning themselves ahead of the Cattle on Feed report. The report was mostly neutral with cattle on feed at 97% compared to trade estimates of 96.8%. Placements were 92% of a year ago with the average trade estimate at 91.5%. Marketings came in at 94% compared to the average estimate of 94.7%. Placements and marketings were a bit negative based on the estimates but it does show a continued contraction of the herd. With the weakness of futures last week, this should already be factored in with traders again looking ahead to cash activity. Weekly exports sales were good at 17,300 providing some support on Friday. Boxed beef showed gains with choice up $0.21 and select up $0.74. The Commitment of Traders report showed funds liquidating 7,182 futures contracts bringing their net long futures positions to 84,621.

Hog futures showed a nice rebound in nearby February and April contracts with moderate gains in later contracts. Much of the strength could be attributed to strong export sales of 34,100 MT after a few weeks of low exports. Cash was higher which was unusual for the end of the week with the National Direct Afternoon Hog report showing a gain of $0.55. Cutouts also posted a gain of $0.45 to end the week on a positive note. It may be difficult for futures to see much strength today as traders will need more bullish news to become confident to buy into the market. Funds liquidated 12,547 futures positions according to the Commitment of Traders report bringing their total net long futures positions to only 8,890.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was mostly neutral but continued to show a contraction of the cattle herd.	1)	Cash cattle traded lower the past two weeks. Traders will be cautious over how aggressive packers may be again this week and how many cattle were purchased for deferred delivery.
2)	Technically, live cattle held the uptrend line last week. With the Cattle of Feed report now history, traders could buy more aggressively for the longer term.	2)	Consumer demand may be slowing which has put some pressure on boxed beef prices. Beef prices could see some pressure again today.
3)	February hogs held support last week posting a double-bottom which could cause technical traders to buy more aggressively.	3)	The lean hog index was down $0.57 to $73.28 and quite a bit lower than February futures leaving limited upside potential.
4)	Both cash and cutouts were stronger on Friday along with a positive export sales report. This may support the market today as traders begin a new week with an oversold market.	4)	Funds continue to liquidate long positions as they feel little reason to be long in the market under current fundamentals.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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